Buying a house through crowdfunding campaign: practical steps

19 May 2017

Have a dream of buying a dream house but do not have sufficient funds for that? You may not believe, but crowdfunding is one of the real ways of accomplishing your goal. Today, it is more than just helping people in need of medical treatment or travelers who ask for funding their vacation to the Caribbean Islands, or supporting start-uppers with their smart ideas. It is possible to raise funds for whatever, even for a house.

Choosing a house

The first step is comprised of finding or choosing a house to be purchased. In this step, a fundraiser should contact a realtor to look at the future residence place and determine if he likes it or not. Then he should check the price of the house in order to learn if he qualifies for a loan, which includes a down payment. In most cases, when people use crowdfunding to buy a house, they raise funds for a down payment only, which obviously gives better chances to succeed.

Selecting a right place for a campaign

After completing the house-choosing part, it is time to see and select the right crowdfunding website. General platforms like GoFundMe or Kickstarter are good and very popular ones, yet, in our case, trying some specialized real-estate crowdfunding sites like Homefunded, Featherthenest, or DownPaymentDreams, for instance, is not a bad idea. Registration takes 5 minute, where payment methods for receiving funds should also be indicated, whether it is a PayPal or bank account number.

Successful campaign and a catchy story

Step No. 3 is about starting a campaign and it is a most important and decisive part of the process. Uploading a touching photo is not enough. Support seeker should determine how much he needs to achieve the goal, should it be equal to the down payment amount or a little more. Although, on the most platforms, it does not matter what size or type of the house is, one should keep in mind to set a realistic amount for his goal. Asking for 1 million dollars will not dress up the campaign.

Once the necessary amount and time for accomplishing fund raising is set, next comes a solid, convincing story why a registrant should like to buy that house and why friends and family members should contribute. He can give details of where the house is located, what kind of neighborhood it is and any plans on repairing the house once bought it, or if he will invite contributors who lend a helping hand.

Get it viral

In this step, it is vital for a fundraiser to spread a word among as much as great number of people. Family members, relatives, friends, colleagues, even acquaintances and followers from social networks or forums, any connections, in short, can be a help. It is essential that the story be shared on the Internet, as this would create expected effect. No matter if, any friend or family member will donate $10 or $1000; a successfully built campaign will help anyone reach the goal.

Collection starts

When the campaign finally starts, generally, the platforms or websites do the collection work for a fundraiser. Once he raises sufficient funds, the crowdfunding platform transfers the funds to the lender company that provides the house. If that company does not accept third party gift funds, the website will transfer funds to the bank account of the campaigner.

Money matters

Different crowdsourcing websites use and accept different payment methods for contributions. If looking at the specialized websites, Featherthenest.com, for instance, uses Stripe as the only payment method and accept US dollars only. They charge 5% transaction fee on every contribution made by supporters added by almost 3% transaction fee charged by their payment processor Stripe. Homefunded.com charges 5% overall fee for the whole amount raised, which is meant to be paid by the fundraiser at the end of his campaign, whether he achieves the goal or not. The company chose PayPal as their payment tool. Thus, taking into account PayPal’s 2.9% fee, total fee will make 7.9%.

As for mainstream platforms, GoFundMe’s fees are 5% plus 2.9% additional fees. All fees are deducted from the fundraisers. As in the case above, PayPal is their payment partner that does not deduct transaction fees if it is a charity donation. GoFundMe also welcomes debit and credit cards. Contributors can donate in any currency they wish, which then will be converted to the currency of the fundraiser’s campaign. Indiegogo charges from 5% to 8% depending what platform is used. Then 3%+30c paid for processing credit cards. They use Adyen as their global payment platform that allows credit cards support, international deposits and acceptance of currencies like USD, EUR, CAD, GBP, AUD.

Stakes are high

In conclusion, it will be useful to make certain notes to summarize the story. As it was described above, there is no restriction regarding the contributions amount or type of a house under consideration. However, it is highly recommended to set a feasible goal, because, any house costs much more than any other items, funded using crowdfunding. Then, almost all websites and platforms allow return of funds to contributors once a goal is not achieved and the fundraiser wishes to give funds back.

Alternatively, if the target is not achieved, he can just use collected money for the intended purpose by finding deficient funds from other sources. Besides, we recommend those who raise funds being honest with their present state of affairs, as the chances to fail are high and it may bear the reputational risk. Because people may be curious about where their money is spent, so it is up to the fundraiser how to act in any situation. Whatever the risks are, crowdfunding provides unique opportunity to get a dream-house.